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Facebook, Inc’s WhatsApp Putting Twitter to Shame

Fans of
Twitter
were waiting with bated breath leading up to its highly
anticipated Q2 earnings report in late July. Surely, Twitter
would report solid revenue numbers compared to last year since
its comparables were so meager. But how would it answer the
primary question on most people's minds: could Twitter finally
reverse its trend of slowing user growth?

One look at Twitter's stock price jump this past month -- it's
up over 25% -- would seem to indicate growing its user base is no
longer a primary concern. But after further review, Twitter fans
have little to get excited about, comparatively speaking, when
similar services such as
Facebook
's mobile messaging service WhatsApp are growing by leaps and
bounds. A closer look at Twitter's Q2, and the phenomenal growth
of WhatsApp, paint a picture Twitter fans aren't likely to
enjoy.

Just the facts
Much has been made of the impact the recently concluded World Cup
had on Twitter and Facebook. A huge number of tweets and posts
were credited to soccer fans during the world's biggest sporting
competition. Facebook notched an impressive 3 billion
interactions during the World Cup, while Twitter enjoyed 672
million soccer-related tweets. The hope was all that tweeting
would carry over, boosting Twitter's much-maligned active monthly
user count. And it sort of did.

When Twitter reported its user numbers last month, it was
quick to point out its 271 million active users was a 24%
increase from the same period a year ago. Twitter's active mobile
users showed even better improvement, jumping 29% compared to
2013. That certainly sounds good, and it seemed to placate
investors and Twitter aficionados, as the aforementioned stock
price jump demonstrates.

But all the positive hype surrounding Twitter may prove to be
just that; hype. Yes, Twitter now has 271 million active users,
thanks to the World Cup, but how many new tweeters joined the
ranks in the past three months? That number isn't quite as
impressive, to say the least.

Heading into 2014's second quarter, Twitter boasted 255
million monthly active users; a 25% improvement from the year
prior. But that means sequentially, even with the World Cup
driving unprecedented social media usage, Twitter only gained 16
million new users, an improvement of 6% over Q1 of this year.

Now for the even worse news
Much was made of Facebook acquiring mobile messenger WhatsApp for
$19 billion a few months ago. But based on its incredible user
growth, not to mention Twitter's valuation of nearly $30 billion,
WhatsApp may turn out to be a $19 billion steal.

While Twitter was growing its second quarter user base by 16
million compared to Q1, Facebook's WhatsApp increased by 100
million in the past four months. WhatsApp now stands at over 600
million active users, more than twice Twitter's "paltry" 271
million. WhatsApp growth is impressive to be sure, but that's
what should be expected of an early stage, growth business.

The problem for Twitter is that it is also considered to be in
the early stages of its growth curve, yet it isn't even in the
same ballpark as WhatsApp, and Facebook hasn't even taken its
training wheels off yet. Whether or not Facebook is able to
monetize WhatsApp as successfully as it has itself remains to be
seen, but we know Facebook CEO Mark Zuckerberg loves his user
data. WhatsApp, with its 600 million plus users, brings with it a
plethora of information -- information Facebook can and will use
to improve its advertising results, supporting its objective of
increasing ad rates.

Final Foolish thoughts
Even as Twitter continues to bask in the afterglow of its second
quarter, a closer examination reveals it's far from out of the
woods. If WhatsApp is able to add 100 million new, active users
in just four short months, does Twitter really warrant all the
good tidings by adding 16 million in three months? And let's not
forget Twitter's engagement concerns. A recent study of current
and former Twitter users found the overwhelming majority of those
who stopped using the service found it too difficult to find and
filter the information of interest to them, and a shortage of
followers.

Twitter's recent plan to force-feed tweets from non-followed
folks may help address its engagement problems, assuming it
doesn't alienate users first. But concerns about engagement, as
legitimate as they are, pale in comparison to Twitter's user
growth; or lack thereof, especially as it lags WhatsApp.

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